Question
Differential Costs and Revenues A grocery retailer is deciding how to use a particular space in the store. One option is to lease a freezer
Differential Costs and Revenues
A grocery retailer is deciding how to use a particular space in the store. One option is to lease a freezer to put in the space and sell a variety of ice cream treats. The ice cream treats should generate annual revenues of $10,000 but will reduce revenues from other ice cream sales by $2,000 annually. The freezer leases for $1,000 per year, the electricity for the freezer should cost $500 per year, and the cost of the ice cream treats will be $5,000 per year. The other option is to rent shelving for $500 per year and sell artisan bakery goods from a local bakery. The revenues from the bakery items should be $7,000 per year and their cost should be $3,000. Selling the artisan bakery goods should not cause any other loss of revenue. Other costs are the same for the two options. What should the grocery retailer do with the space?
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